The Deficit "Peacocks" And "Vultures"

 Republicans are famous for moaning about the deficit of the federal government -- when Democrats are in power. But they don't mind running up trillions in deficit spending when its time to give to their rich friends and corporations.

They are hypocrites, who only object to spending that might help the poor, the working class, children, or seniors -- basically the bottom 90% of Americans.

Paul Krugman (Nobel Prize economist) divides them into two camps -- Deficit Peacocks and Deficit Vultures. Here is how he describes it in his New York Times column:

The term “deficit peacocks” was coined by the Center for American Progress for people who preen and posture about fighting deficits without offering realistic policy proposals. I’d broaden the term to include what I used to call Very Serious People — those who inveigh against the evils of debt not because they’ve done a careful analysis but because they imagine that it makes them sound earnest and tough-minded.

The glory days of deficit peacocks were the early teens, an era in which people like Alan Simpson and Erskine Bowles were lionized by the news media. As Vox’s Ezra Klein noted at the time, for some reason “the usual rules of reportorial neutrality don’t apply when it comes to the deficit”; the wisdom and virtue of deficit warriors were simply taken for granted.

We haven’t heard much from the deficit peacocks in recent years, even though the budget deficit, which declined sharply during the Obama years, soared again under Donald Trump. Funny how that works. But you can be sure they’ll be back in force if Joe Biden wins this November.

What about deficit vultures? That’s the term I’ve been using for politicians who exploit real or imagined fiscal distress to feed a reactionary policy agenda.

After the last crisis, conservatives used deficits as an excuse to cut social programs — for example, a number of states made it much harder to collect unemployment benefits. This time around, McConnell and Trump are trying to exploit deficit fears to force state governments to downsize, undermine (and possibly privatize) the post office and more.

It goes almost without saying that the deficit vultures are hypocrites. After all, Trump and McConnell rammed through a $2 trillion tax cut in 2017, with no apparent concern about the effects on the deficit. Nor have I heard any Republican complaints about Trump’s huge bailouts for farmers, whose distress is largely the result of his own policies. . . .

Still, hypocrisy aside, should we be worried about the effects of Covid-19 on debt? No.

It’s true that we’re headed for some eye-popping numbers. Last week the Congressional Budget Office released preliminary economic and budget projections for the next two years, which were both shocking and unsurprising.

That is, the numbers were grim but more or less in line with what many independent economists have been predicting. In particular, the budget office expects the Covid-19 crisis to drive the unemployment rate to 16 percent in a few months, which might even be on the low side.

Soaring unemployment will cause federal revenues to plunge, and also lead to a surge in spending on safety-net programs like unemployment insurance, Medicaid and food stamps. Add in the large relief packages Congress has passed, and the budget office projects a deficit that will temporarily rise to levels we haven’t seen since World War II, and it expects federal debt to rise to 108 percent from 79 percent of G.D.P., which sounds scary.

But the government will be able to borrow that money at incredibly low interest rates. In fact, real interest rates — rates on government bonds protected against inflation — are negative. So the burden of the additional debt as measured by the rise in federal interest payments will be negligible. And no, we don’t have to worry about paying off the debt; we never will, and that’s OK.

The bottom line is that right now, the only thing we have to fear from deficits is deficit fear itself. Pay no attention to the peacocks and vultures: In this time of pandemic, we can and should spend whatever it takes to limit the damage.